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why does credit have to be an integeral part of capitalism
It doesn't have to be a part of capitalism at all. Credit and loan are nowhere in the definition of capitalism. Because I need free money. Credit does not have to be an integral part of Capitalism but since it is profitable for both borrowers and lenders, therefore it appears to be a permanent feature of Capitalism. Credit enables entrepreneurs to enhance return on their equity in a firm provided rate of interest is lower than the required rate of return for the business. The pitfall is that over-leveraging can be fatal in an adverse economic environment and could be fatal for the firm.
I don't care if it is free money. I simply need money! Credit is an important part in any modern economy, not just Capitalism. People need credit to get expensive luxury goods without saving money for decades. But even luxury goods aside, it's difficult to afford a home on personal income alone, especially in the middle class.
Credit is not free money. It comes with a big interest rate. You think you are getting money, but you are actually loosing it. Purchasing luxury goods not the issue. Credit to provide working capital to small and large business truly is the "grease" of our economic machine. Beyond that, credit is a dangerous tool allowing you to spend your descendants' assets; it used to be you'd bequeath assets to your heirs, now the flow is reversed. It smooths out prosperity. The cost is interest. I think credit is a socialist aspect of mixed capitalism and socialism. It is a way of getting money out there for people to spend and businesses to make. Without it, people would be forced to curtail most or all of their consumption whenever their funds got low. This in turn would force businesses to either lower their prices or wait until consumers got enough money to spend again - which could take a long time if prices remain high or go higher.
Credit can be took after certain period. For getting more money people save it in bank so that they can get extra credit money. and then bank use it different purposes dur to which money remain in circulation. And circulation of money is good for economy. this is a very true statementThe US economy is "debt based". There is no free currency, only that created by bonds from a private corporation called "The Federal Reserve". The "Fed" is allowed to create money from nowhere, and charge interest for loaning it to the US Government. Not only that, but the loans are guaranteed by the taxation power of the US Government. Sweet deal huh? It's the biggest scam ever conceived. So credit is an integral part of what we call capitalism in the US. Watch Zeitgeist (Addendum) and it kinda goes into what you wanna know. Fantastic movie in general. and yes, there really is no such thing as free money. you're not really even losing money because there's no real money to start off with. [1] Capitalism is an economic system where means of production are privately owned. Hence it is synonymous with a market economy. Therefore competition and individual property rights also lie at the heart of its ideology. However, for many people to be able to afford things such as homes, and for entrepreneurs to 'engage' with the institution and provide services etc, credit needs to be provided so these commodities can initialy be purchased.
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